On appeal from Division of Tax Appeals.
Fritz, Bischoff and Morgan. The opinion of the court was delivered by Morgan, J.A.D.
[166 NJSuper Page 412] For the second time we are confronted with an issue concerning the applicability of the Sales and Use Tax Act, N.J.S.A. 54:32B-1 et seq. (hereinafter "the act"), to food sales made through coin-operated vending machines. In Automatic Merchandising Council v. Glaser , 127 N.J. Super. 413 (App. Div. 1974), we invalidated an administrative regulation subjecting automatically vended foods sold for $.10 or less to the burden of the sales tax as being contrary to the terms of the act. In this appeal we consider whether the act imposes a sales tax upon automatically
vended foods of the kind sold by respondents*fn1 regardless of price. The Division of Tax Appeals held in these consolidated cases that receipts from vending machine sales of food of the kind sold by respondents are free from the impost, and accordingly vacated the deficiency asserted against one of the respondents and reversed the denials of refund claims of the other two. The Director of the Division of Taxation appeals.
A description of the statutory context must precede consideration of the projected issue. N.J.S.A. 54:32B-3(a) is the primary source of the sales tax, and speaks in the broadest of terms. Section 3(a) imposes a tax upon the "receipts from every retail sale of tangible personal property, except as otherwise provided in this act [ N.J.S.A. 54:32B-1 to 29]." Tangible personal property is defined as "[c]orporeal personal property of any nature," a definition broad enough to include all types of food products of the kind respondents sell. Automatic Merchandising Council v. Glaser, supra at 420, so held and noted the agreement of the Director of Taxation with that conclusion.
Notwithstanding the broad scope of subsection 3(a), it is quite clear, however, that sales of most food products are not taxed under that subsection. N.J.S.A. 54:32B-8(b), the provision describing the exemptions from the tax imposed by subsection 3(a), reads in pertinent part as follows:
Receipts from the following shall be exempt from the tax on retail sales imposed under subsection (a) of section 3 and the use tax imposed under section 6:
(b) Sales of food, food products, beverages except alcoholic beverages, excluding draught beer sold by the barrel, as defined in
the Alcoholic Beverage Tax Law, dietary foods and health supplements, sold for human consumption off the premises where sold but not including (i) candy and confectionery, and (ii) carbonated soft drinks and beverages all of which shall be subject to the retail sales and compensating use taxes, whether or not the item is sold in liquid form. Nothing herein shall be construed as exempting food or drink from the tax imposed under subsection (c) of section 3; * * *.
The effect of this exemption is to remove most foods, food products and beverages sold for consumption off the premises from the tax imposed by the broad provisions of subsection 3(a). Food products and beverages not included within the 8(b) exemption and not specifically made subject to the tax imposed by 3(c) remain subject to the broad 3(a) tax. Among the items so taxed are carbonated soft drinks, candy and confectionery.*fn2 Such items taxed under 3(a) would, of course, be subject to the partial exemption therefrom provided by N.J.S.A. 54:32B-8(i) which excludes from the tax vending machine sales of tangible personal property for $.10 and under. Automatc Merchandising Council v. Glaser, supra. Most sales of food products and beverages, however, are taxed under N.J.S.A. 54:32B-3(c) and the exemption contained in 8(b) is specifically declared inapplicable to the tax imposed by 3(c). Similarly, the 8(i) exemption, applicable to the tax imposed by N.J.S.A. 54:32B-3(a), is not applicable to the tax imposed by 3(c).
Subsection 3(c), the specific source of the tax on food sales and which is not to be affected by the exemption contained in subsection 8(b), extends the tax to receipts from certain ...